The federal
bank and thrift regulatory agencies recently issued
final rules governing their authority to take disciplinary
action against independent public accountants and
accounting firms that perform audit and attestation
services required by section 36 of the Federal Deposit
Insurance Act. Proposed rules were published for comment
in the Federal Register in January, 2003.

The final rules, which take effect on October 1,
2003, establish procedures under which the agencies
can, for good cause, remove, suspend, or bar an accountant
or firm from performing audit and attestation services
for insured depository institutions with assets of
$500 million or more. The rules permit immediate suspensions
in limited circumstances.

The rules provide that certain violations of law,
negligent conduct, reckless violations of professional
standards or lack of qualifications to perform auditing
services may be considered good cause to remove, suspend
or bar an accountant or firm from providing audit
services for banking organizations subject to section
36. Also, the rules prohibit an accountant or accounting
firm from performing audit services if the accountant
or firm has been removed, suspended, or debarred by
one of the agencies, or if the U.S. Securities and
Exchange Commission or the Public Company Accounting
Oversight Board has taken certain disciplinary action
against the accountant or firm.

The rules are being issued by the Board of Governors
of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the Office of the Comptroller
of the Currency and the Office of Thrift Supervision.
The rules amend each agency’s rules of practice
separately, but are substantively identical.

A copy of the final rules, which were published in
the Federal Register for August 13, 2003,
is attached(488 KB, 42 pages).